SPLIT ROLL PARCEL TAX RULING STANDS

We are also pleased to report the California Supreme Court declined to review a case in which taxpayers successfully overturned a parcel tax that had been levied at a non-uniform rate, in violation of a state law. The high court’s action means the First District Court of Appeal’s March 6 published decision in George J. Borikas v. Alameda Unified School District will stand.

When school districts put parcel taxes before voters those taxes should comply with state law requiring equal treatment of business and residential properties.  Some school districts in Alameda, Davis, San Leandro, West Contra Costa, and Los Angeles have been violating that principle by proposing and passing parcel taxes that tax parcels at different rates.

The issue stems from Proposition 13, the 1978 property-tax cutting initiative, and Proposition 62, a 1986 initiative clarifying that new local government taxes must be voter-approved. To implement the two initiatives, the Legislature passed laws setting rules for new local taxes. Among the requirements, parcel taxes must “apply uniformly to all taxpayers or all real property within the district.”

According to CalTax, the Court of Appeal ruled that a parcel tax levied by the Alameda Unified School District is illegal because its rates did not apply uniformly to all real property within the district. At issue was a parcel tax, approved by voters in June 2008, that was imposed on residential parcels at $120 per year, and large commercial and industrial parcels at 15 cents per square foot, with a maximum of $9,500 per year.

The court said state law does not allow school districts to create property classifications and impose differential parcel tax burdens. However, the court did not strike down the entire tax, noting that the tax measure contained a severability clause. Thus, the school district may impose the tax, as long as it is applied at the $120-per-year rate on all parcels, regardless of size or use.

The court also ruled that exemptions for seniors and SSI recipients do not exceed the statutory authority provided to school districts by state law, and thus are allowed.

Earlier this year, AB 59 (Bonta; D-Alameda), which sought to abrogate this decision, before it was even final, was defeated in the Assembly Revenue and Taxation Committee.  The bill would have allowed de facto Split Roll Parcel Taxes by specifying that the provisions requiring uniform application of taxes shall not be construed as limiting a school district from assessing taxes in accordance with rational classifications among taxpayers or types of property.

Although AB 59 is “dead” for the year, advocates of such ideas have a tendency to try and revive them, so we will remain vigilant.

© 2007-2012 Building Owners and Managers Association of California (BOMA Cal)